Hamster wheel

29 April 2014 By Dominic Elliott

The German lender’s equity increased by 1 bln euros in Q1. Fixed-income trading was not as bad as feared, and a 1.5 bln euro bond will further boost capital. But rising regulatory costs look sticky. The good news: a much-needed equity raise has now become an easier sell.

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Deutsche Bank on April 29 reported a 30 percent drop in first-quarter pretax profit to 1.7 billion euros versus the same period a year ago.

Germany’s largest lender suffered from a weaker performance at its investment banking unit, where pretax profit fell 22 percent to 1.5 billion euros as revenue dropped 10 percent.

The bank’s common equity Tier 1 ratio slipped to 9.5 percent at the end of March, from 9.7 percent three months earlier. Although Deutsche boosted its capital base by 1.3 billion euros over the quarter, primarily through retained earnings, the improvement was more than countered by a rise in risk-weighted assets (RWAs). RWAs rose by 23 billion euros to 373 billion euros over the quarter.

Deutsche’s equity-to-assets leverage ratio improved to 3.2 percent, from 3.1 percent three months earlier as the bank’s gross balance sheet shrank.

Co-Chief Executive Anshu Jain said that “we would not rule out any option” when it comes to raising capital.

Expenses at the bank remained high, with Deutsche’s cost-to-income ratio rising to 77 percent from 71 percent a year ago. Deutsche’s long-term goal is to reduce this measure of efficiency to 65 percent or less.

Shares in Deutsche Bank were trading 2 percent higher at 32.19 euros by 1015 BST.

Context News

Deutsche Bank on April 29 reported a 30 percent drop in first-quarter pretax profit to 1.7 billion euros versus the same period a year ago.

Germany’s largest lender suffered from a weaker performance at its investment banking unit, where pretax profit fell 22 percent to 1.5 billion euros as revenue dropped 10 percent.

Deutsche’s equity-to-assets leverage ratio improved to 3.2 percent, from 3.1 percent three months earlier as the bank’s gross balance sheet shrank.

Co-Chief Executive Anshu Jain said that “we would not rule out any option” when it comes to raising capital.

Shares in Deutsche Bank were trading 2 percent higher at 32.19 euros by 1015 BST.

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